Friday, 3 March 2017

Surplus narrows (because cars)

Last month's record trade surplus was revised down a touch to $3.3 billion, while the seasonally adjusted result for January was a little softer at $1.3 billion.

There was a big 39 per cent or $671 million drop in gold exports in the month, which didn't help the cause.

But still, the cumulative seasonally adjusted surplus over the past three months of $6.3 billion is a level not matched across the available 45 years of data, and it represents quite some turnaround from the string of deficits through 2014-16.

Although January export values are typically lower in original terms, there has been a tremendous rebound over the past year in FOB values for iron ore (+79 per cent) and coal (+63 per cent), while LNG exports are now coming to the party (+43 per cent).

The trade services balances continues to grind its way back, while tourism is still tracking very strongly thanks to the weaker currency.

Exports to China burst to a record high $10.1 billion in December, but it will be a challenge to sustain exports at that level as 2017 progresses.

Finally, the ramp up in LNG exports should be a boost to Queensland's coffers, while the spectacular rebound in iron ore prices is putting Western Australia's merchandise trade balance back on a northwards trajectory.

The wrap

Overall, it was another decent trade surplus in January, albeit one which was well and truly put in the shade by the record result in the preceding month.

It's worth noting that a substantial 37 per cent or $1.1 billion increase in imports - the largest in 16 months - was also a big part of the reason for the narrowing trade surplus in January.

We might need to get used to this higher level of imports, not least because Australia doesn't really manufacture many new cars much any more!